It is the smaller organisations turn to stage this year but, with many lacking the required resources, advisers will play an integral role. Robert Cochran, pensions expert at Scottish Widows, explains
How many firms employing between 250 and 350 people that you deal with have a pensions department? This is the size of firms currently going through, or approaching, their individual staging date and their ability to support auto-enrolment is very different from firms a year ago.
In February last year, firms staging employed between 20,000 and 30,000 staff. The legislation is more or less the same and the duties that fall on an employer are the same. The differences are scale, capacity and access to support.
When larger employers were hitting their individual staging dates in 2013, there were only a handful doing so every month. They had pensions, HR, finance and payroll departments. All of this internal muscle they could flex to help deal with the complexities auto-enrolment brought.
Larger employers could access support in the form of advisers and providers, as their businesses were especially valuable and the number of employers staging was manageable.
There was little capacity concern as advisers, providers and payroll companies were only just facing into the auto-enrolment journey and building bespoke solutions for many of these larger employers. The one thing missing from the market was experience: hardly any firms had staged and there were very few experts in the market.
At the risk of stating the obvious, smaller employers, on the whole, do not have pension departments. They have finite HR resources and payroll is unlikely to have the capacity to absorb a complicated project of the likes of auto-enrolment.
Access to advice and support will become a little more restricted throughout 2014. In the second quarter of this year alone, there is an average of 10,000 small- and mid-sized enterprises (SMEs) a month staging. With 30,000 employers approaching their staging date and less than 22,000 registered advisers in the UK, access to adviser resource will be more difficult to come across.
That is not to mention payroll, provider and middleware resource, which, despite some assertions to the contrary, remains a critical cog of the auto-enrolment machine.
Some small businesses are still labouring under the misapprehension their payroll company will swoop in and deal with all things auto-enrolment on their behalf.
A large number of the duties of auto-enrolment are well served in payroll, like assessment and contribution calculation. However, there are few systems currently able to deal end-to-end with employer duties in auto-enrolment.
The number will grow but not quickly enough for stagers over the next few months, which means they are still likely to need auto-enrolment software alongside payroll.
The challenge for SMEs is knowing what to ask and to whom. Advisers have a huge role to play in guiding businesses through their challenging auto-enrolment journey and ensuring that, above all else, the solution selected will keep them compliant with the minimum of ongoing effort.
The good news is that much of the hard work – and hard learning – has been done over the past 12 months.
Almost every one of the 600 firms we worked with who staged in 2013 had an adviser in place managing the project, making the recommendations and gaining vast amounts of knowledge of what works and what does not.
This added insight in the adviser and provider community will lead to better, quicker customer solutions.
Payroll companies are gaining experience of working with different providers and developing standard file formats that fit with the different auto-enrolment solutions in the market. This reduces the cost of these data builds and the timescales involved.
In 2013, nearly every payroll extract was an individual build, with all the costs this entails: the more complex the pay structure, the more expensive the build.
Now, many payroll providers can produce more straightforward and 'off the shelf' file formats. This does not, however, take away from the other bugbear of data quality – but that is another story.
Decision making at SMEs is concentrated by necessity, meaning it can be easier and quicker to make decisions and hit project timescales.
So, while SMEs do not have well-resourced departments to deal with auto-enrolment, they should be able to use their nimble approach to business and take advantage of simpler off-the-shelf solutions that have come to market and been designed with real life experience behind them.
Three years at Wells Fargo
Effective from 9 December 2019
One firm with permission suspensions left
Continuing the Architas education series for clients.
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